Are Microgrids Utilities? Washington, D.C. is Asking

In a newly launched grid modernization initiative, the District of Columbia is wrangling with the question: Are microgrids utilities?

The question arises as the district’s Public Service Commission begins exploring how the nation’s capital city can create a more sustainable and reliable electric grid.

In a report issued last week (Docket 1130), the commission follows in the footsteps of New York and California to determine what regulations are needed – and which get in the way – of microgrids and other forms of distributed energy.

The question — are microgrids utilities — is one of several regulatory complexities the report points out as the district begins on a multi-year journey to modernize the grid.

Since much of today’s electric regulation was created before distributed energy technologies were conceived – or at least became popular — the electricity industry finds itself trying to fit square pegs into round holes.

Microgrids may be the toughest fit because they are hard to define, given that they can perform several roles. Sometimes microgrids act as generators, sometimes they are distribution systems, and sometimes they become utility customers.

The district’s proceeding is significant not only because of the issues it tackles, but also because the commission plans to dive into a pot of money — $25 million – to provide grants for test programs. The money comes from a settlement in the Pepco-Exelon merger.

Are microgrids utilities – let’s hope not

If regulators deem microgrids to be de facto utilities, “the microgrid would be subject to a host of regulations applicable to electric companies,” said the report, prepared by commission staff.

Regulations created for large and complex utility companies would be imposed on relatively small and simple microgrids.

As utilities, microgrids would need to seek approval before the state commission for the rates they charge customers — even though they might only have a handful of customers. Microgrids also would be subject to safety and reliability standards set up for utilities. They would have to comply with renewable portfolio standards and meet emissions reporting requirements.

And if microgrids are not utilities…

And if microgrids are not utilities, can utilities operate them? This is a big question not only in the district, but also in states with similar competitive rules that prevent them from owning generating plants.

Pepco, the utility that operates in the district, argued that utility-microgrid partnerships are still possible. The utility would own the wires within the microgrid, while a private developer would own the generation portion of the microgrid.

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It also calls for creation of a grant program to pilot and possibly demonstrate distributed energy technologies using the $25 million in Exelon-Pepco merger settlement funds. The plan envisions grants for microgrids, as well as advanced control systems, cogeneration, demand management, electric vehicles, energy storage, fuel cells, photovoltaic systems, smart inverters, voltage regulation, and district heating and cooling.

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The district appears to offer a great deal of microgrid opportunity. Washington imports most of its power, making it vulnerable to grid disruptions that may occur miles away. Microgrids could shore up the grid’s reliability and provide local energy.

And as the nation’s capital, Washington’s ultimate position on distributed energy regulation is important. Like New York, Chicago and other high visibility cities, it may create microgrid models others can follow.

The public service commission will take public comment on the initiative until March 27. A public meeting will be held February 28, 2017, 5:30 p.m. in Commission Hearing Room, 1325 G Street N.W., Suite 800, Washington, D.C.

Elisa Wood is the chief editor of MicrogridKnowledge.com. She has been writing about energy for more than two decades for top industry publications. Her work also has been picked up by CNN, the New York Times, Reuters, the Wall Street Journal Online and the Washington Post.

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A microgrid is a discrete energy system consisting of distributed energy sources (e.g. renewables, conventional, storage) and loads capable of operating in parallel with, or independently from, the main grid. The primary purpose is to ensure reliable, affordable energy security for commercial, industrial and federal government consumers. Benefits that extend to utilities and the community at large include lower greenhouse gas (GHG) emissions and lower stress on the transmission and distribution system.